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French ministers step up Brit-bashing

France fuelled a cross-Channel row on Friday, describing the state of Britain's economy as "very worrying" as the press in London reacted with fury to French calls for British debt to be downgraded.

French ministers step up Brit-bashing

The row comes after Britain clashed with France at an EU summit and refused to join members of the eurozone currency bloc in a new fiscal pact, prompting French President Nicolas Sarkozy to declare there are now “two Europes.”

Despite widespread condemnation in London of criticism from Paris on Thursday, Finance Minister Francois Baroin picked up the issue again, saying the French economy was in better shape than the British one. 

“It’s true that the economic situation in Great Britain is very worrying and that we prefer being French rather than British on the economic front at the moment,” Baroin said on Europe 1 radio.

“We don’t want to be given any lessons and we don’t give any,” he said.

Baroin’s comments came as the British press on Friday slammed French officials for suggesting that ratings agencies were targeting the wrong country for a debt downgrade by looking at France.

US ratings agencies Standard & Poor’s and Moody’s have warned that France is close to losing its prized triple-A debt rating over fears that eurozone members cannot control their rising debt and deficits.

“They should start by downgrading the United Kingdom, which has greater deficits, as much debt, more inflation and less growth than us,” central bank chief Christian Noyer told regional newspaper Le Telegramme on Thursday.

French Prime Minister Francois Fillon then picked up on the theme, telling reporters in Sao Paolo that ratings agencies seemed to be ignoring the state of British government finances.

“We are challenged on the European currency, first of all because we are too indebted,” he said.

“But we are not the only ones. Our British friends are even more indebted than we are and have a higher deficit but the ratings agencies do not seem to notice this.”

A Downing Street spokeswoman said Prime Minister David Cameron had not spoken to Sarkozy but he was expecting to hold more talks in coming days.

Asked about the French comments on Britain’s economic issues, the spokeswoman said: “We are very clear. We have a credible plan endorsed by numerous international organisations.

“The bond yields underline the credibility of that plan,” she said, in reference to the cost to Britain of borrowing to fund its debt, which compares favourably with the benchmark German rate.

British officials would not be drawn into responding directly to the French attacks but the British press reacted furiously.

Noyer’s comments were dismissed as “outrageous” and “plain wrong” by The Times. “It is simply not the job of a central bank governor to urge the downgrading of another country’s credit,” it added.

Popular tabloid The Sun ran a scathing lead article attacking Noyer under the headline “Gall of Gaul.”

“You find out who your friends are in a crisis,” it continued. “We shouldn’t be surprised, then, when the head of the Bank of France tries to better his country’s economic position by sabotaging ours.”

“Monsieur Noyer, you’re a AAA-rated fool,” it concluded.

The Daily Telegraph, which splashed “France declares war of words on Britain” on its front-page, quoted Conservative lawmaker David Ruffley calling the comments “another example of Gallic self-delusion on an epic scale.”

The French attacks came ahead of presidential and legislative elections next year and as France’s state statistics agency warned the country will fall into a brief and mild recession through to the first quarter of 2012.

The agency said the latest surveys indicate activity is slowing sharply, with the economy expected to contract by 0.2 percent in the final quarter of this year and 0.1 percent in January through March 2012.

Timid growth of 0.1 percent is expected in the second quarter.   Analysts said French officials seemed to be looking to deflect attention from the country’s own economic concerns.

British foreign exchange firm Moneycorp described Noyer’s attack as “a clumsy attempt to divert attention from the possibility that France itself could lose its triple-A rating.”

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The Euro celebrates its 20th anniversary

The euro on Saturday marked 20 years since people began to use the single European currency, overcoming initial doubts, price concerns and a debt crisis to spread across the region.

The Euro celebrates its 20th anniversary
The Euro is projected onto the walls of the European Central Bank in Brussels. Photo: Daniel Rolund/AFP

European Commission chief Ursula von der Leyen called the euro “a true symbol for the strength of Europe” while European Central Bank President Christine Lagarde described it as “a beacon of stability and solidity around the world”.

Euro banknotes and coins came into circulation in 12 countries on January 1, 2002, greeted by a mix of enthusiasm and scepticism from citizens who had to trade in their Deutsche marks, French francs, pesetas and liras.

The euro is now used by 340 million people in 19 nations, from Ireland to Germany to Slovakia. Bulgaria, Croatia and Romania are next in line to join the eurozone — though people are divided over the benefits of abandoning their national currencies.

European Council President Charles Michel argued it was necessary to leverage the euro to back up the EU’s goals of fighting climate change and leading on digital innovation. He added that it was “vital” work on a banking union and a capital markets
union be completed.

The idea of creating the euro first emerged in the 1970s as a way to deepen European integration, make trade simpler between member nations and give the continent a currency to compete with the mighty US dollar.

Officials credit the euro with helping Europe avoid economic catastrophe during the coronavirus pandemic.

“Clearly, Europe and the euro have become inseparable,” Lagarde wrote in a blog post. “For young Europeans… it must be almost impossible to imagine Europe without it.”

In the euro’s initial days, consumers were concerned it caused prices to rise as countries converted to the new currency. Though some products — such as coffee at cafes — slightly increased as businesses rounded up their conversions, official statistics have shown that the euro has brought more stable inflation.

Dearer goods have not increased in price, and even dropped in some cases. Nevertheless, the belief that the euro has made everything more expensive persists.

New look

The red, blue and orange banknotes were designed to look the same everywhere, with illustrations of generic Gothic, Romanesque and Renaissance architecture to ensure no country was represented over the others.

In December, the ECB said the bills were ready for a makeover, announcing a design and consultation process with help from the public. A decision is expected in 2024.

“After 20 years, it’s time to review the look of our banknotes to make them more relatable to Europeans of all ages and backgrounds,” Lagarde said.

Euro banknotes are “here to stay”, she said, although the ECB is also considering creating a digital euro in step with other central banks around the globe.

While the dollar still reigns supreme across the globe, the euro is now the world’s second most-used currency, accounting for 20 percent of global foreign exchange reserves compared to 60 percent for the US greenback.

Von der Leyen, in a video statement, said: “We are the biggest player in the world trade and nearly half of this trade takes place in euros.”

‘Valuable lessons’

The eurozone faced an existential threat a decade ago when it was rocked by a debt crisis that began in Greece and spread to other countries. Greece, Ireland, Portugal, Spain and Cyprus were saved through bailouts in return for austerity measures, and the euro stepped back from the brink.

Members of the Eurogroup of finance ministers said in a joint article they learned “valuable lessons” from that experience that enabled their euro-using nations to swiftly respond to fall-out from the coronavirus pandemic.

As the Covid crisis savaged economies, EU countries rolled out huge stimulus programmes while the ECB deployed a huge bond-buying scheme to keep borrowing costs low.

Yanis Varoufakis, now leader of the DiEM 25 party who resigned as Greek finance minister during the debt crisis, remains a sharp critic of the euro. Varoufakis told the Democracy in Europe Movement 25 website that the euro may seem to make sense in calm periods because borrowing costs are lower and there are no exchange rates.

But retaining a nation’s currency is like “automobile assurance,” he said, as people do not know its value until there is a road accident. In fact, he charged, the euro increases the risk of having an accident.